Norm and Penny, both 52, hope to retire in 10 years. But before they’re ready, they want to help pay for college for their three children. The oldest is a college senior, the middle will start college in the fall, and the youngest is still in grade school.

It’s a balancing act, for sure.

"The biggest financial challenge right now is the stress of not knowing if we are saving enough for retirement and how we can retire before 65 without Medicare," Norm says.

The couple, whose names have been changed, have saved $291,000 in 401(k) plans, $670,000 in IRAs, $420,000 in mutual funds, $9,000 in savings and $1,000 in checking. They also have $40,000 set aside for college for their two younger children, and Norm can expect an annual pension of $48,000 at age 65.

The Star-Ledger asked Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown, to help the couple determine if their wants are realistic.

"Norm and Penny have college and retirement on their minds, and like many families, have these competing goals to wrestle with," D’Agostini says.

They’ve been avid savers, maxing out Norm’s 401(k) with $22,500 a year, including the catch-up contributions. They also save $6,000 a year for college and an extra $18,000 a year in non-retirement accounts. That’s $46,500 a year in total savings, which is more than 21 percent of Norm’s income.

But at times, their cash flow does not allow for this and Norm moves money from one savings vehicle to another, D’Agostini says.

It would be important to get a better handle on where the money is coming from and where it is going so future budgeting can be more precise than what they do today.

First, college.

The oldest child is a senior, and tuition bills are $40,000 a year, but are almost over. Norm did take a $17,000 Sallie Mae loan, and his child will pay that loan upon graduation at a rate of 6.8 percent interest.

They expect their middle child, who will start college in the fall, to also have bills of about $40,000 a year. The youngest child won’t enter college until 2022.

"Many parents decide on an amount that they are willing to pay for college, and then obligate the children for the balance," D’Agostini says. "It is important, before selecting a college to determine what that obligation will look like."

She says at high interest rates of 6.8 and 7.9 percent, college loans can put a burden on children upon graduation. This might prevent them from moving out of their family home if their budget will not allow for tuition payback and rent.

"Starting salaries for many graduates have not kept pace with inflation, and yet housing costs in the New York metro area have gotten pricey," she says. "One variable that might influence (where to go) would be which type of job they would be looking for after graduation, and to explore what the starting salary for that job might be."

D’Agostini recommends that before signing on to a college, applicants should see which college will give the most financial support in the way of scholarships and grants. This way, the burden upon graduation is less.

LONG-TERM CARE INSURANCE

One possible risk lies on the horizon for Norm and Penny -- the potential need for long-term care. The cost and need for this kind of care has been on the rise as the population ages, and more diseases that used to cause death become chronic, CFP Jody D'Agostini says. "Instead of dying, we linger," she says. "Unless you have large financial resources, it is difficult to fund these expenses, and maintain the lifestyle for the other spouse."

Here's a look at the average cost of care in New Jersey.

Assisted living:
$71,928

Nursing home (private room):
$109,318

Home health aide care:
$48,048

Source: 2013 Genworth Cost of Care survey; Jody D'Agostini, CFP

"Often, if a school that has a lesser academic profile than your high school résumé, they will be more willing to come up with money to entice you to enroll at their college," she says.

The couple would have to come up with lots of cash to be ready for tuition bills for their younger children.

D’Agostini says they could commit an additional $80,000 toward the middle child’s education funding and $140,000 for the youngest.

"This would provide over 80 percent funding for both children’s educations, and leave them with an eventual loan of $17,000," she says. "They would be able to support the cash flow to pay for all remaining eight years of education."

The good news is that these whopping college bills won’t interfere with their retirement goals.

Norm is one of the fortunate few who have a $48,000 per year pension beginning at age 65. Coupling this with his Social Security benefit of $32,184 per year, and Penny’s Social Security benefit of $16,092, the couple will have more than $93,000 of guaranteed income.

"This will cover over 57 percent of their living expenses," D’Agostini says, but importantly, it will cover all of his fixed expenses in retirement. The rest of the expenses are discretionary, and as long as they can control their spending in retirement, they should be fine, she says.

"That means that in the years when their retirement accounts are not performing as well, they should reduce the amount that they draw from the accounts," she says. "Conventional wisdom says that a 4 percent rate of withdrawal with their moderate risk tolerance should provide adequate income for them over a 30-year retirement."

D’Agostini took at look at their investments, and while they’re at a "moderate" allocation, which fits their risk tolerance, they have very few asset classes.

"I would recommend that they diversify their assets, so that they will ultimately reduce the risk in their investments," she says. "They have only five asset holdings, and I would recommend that they include at least another four asset classes so that they do not run the risk of having all their eggs in a small number of baskets."

The couple could actually retire in 2024 at the age 62, but D’Agostini says the longer they hold out, the better.

"This would allow them to accumulate more and be closer to the full retirement age for taking their monthly Social Security," she says. "Also, it will allow them to have their medical expenses covered until they are Medicare eligible."

Get With the Plan is designed to illuminate personal finance concepts and isn’t a substitute for actual financial planning or dedicated professional advice. To participate, contact Karin Price Mueller at kmueller@starledger.com.